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recognition by the consuming public, a sophisticated distribution
network, and hundreds of hair stylists trained in the use of the
company’s products. From 1982 through April 21, 1989, JPMS’s share
of the salon-only market, in comparison with those of its chief
competitors, improved every year. In April 1989, JPMS was among
the top five companies in the salon-only market.
From JPMS’s inception until Mr. Mitchell’s death in April
1989, neither Mr. Mitchell nor Mr. DeJoria had any formal contract
with JPMS regarding compensation. Instead, they set sales and
profitability goals for JPMS at the beginning of each fiscal year.
Thereafter, in September or October of each year, they divided
equally the company’s available income.
For fiscal years ended July 31, 1984 through 1988, Messrs.
Mitchell and DeJoria each received the following payments from
JPMS:
FYE 7/31 Salary Management Fees Total
1984 --- --- 1$1,086,500
1985 --- --- 12,305,000
1986 --- --- 14,162,525
1987 $185,125 $8,565,000 8,750,125
1988 1,308,000 10,500,000 11,808,000
1 Payments to Messrs. Mitchell and DeJoria for this year
were not broken down into salary or management fees.
JPMS characterized these payments as compensation for services
rendered.
Between August 1, 1988, and April 21, 1989, JPMS paid Mr.
Mitchell $10,758,046 (which JPMS characterized as compensation for
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